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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________

_____________________________
Commission File Number:
001-39644
_____________________________
Archaea Energy Inc.
(Exact name of registrant as specified in its charter)
_____________________________
Delaware
85-2867266
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
4444 Westheimer Road, Suite G450
Houston, Texas 77027
(Address of principal executive offices and zip code)
(346) 708-8272
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share
LFG
The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No    
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No     
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No    
As of October 31, 2022, there were 81,592,637 shares of Class A Common Stock and 39,052,668 shares of Class B Common Stock issued and outstanding.

1

Table of Contents
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Archaea Energy Inc.

Consolidated Balance Sheets – As of September 30, 2022 and December 31, 2021

Consolidated Statements of Operations – Three and nine months ended September 30, 2022 and 2021

Consolidated Statements of Equity – Three and nine months ended September 30, 2022 and 2021

Consolidated Statements of Cash Flows – Nine months ended September 30, 2022 and 2021

Aria Energy LLC (Predecessor)
Consolidated Statements of Operations – For the periods from July 1 to September 14, 2021 and from January 1 to September 14, 2021
Consolidated Statements of Comprehensive Income – For the periods from July 1 to September 14, 2021 and from January 1 to September 14, 2021


2

Table of Contents
Commonly Used Terms and Definitions
Unless the context otherwise requires, the terms “Archaea” and the “Company” refer to Archaea Energy Inc. and its consolidated subsidiaries. In addition, the following company or industry-specific terms and abbreviations are used throughout this Quarterly Report on Form 10-Q (this “Report”):

Archaea Merger: The transactions executed pursuant to the Archaea Merger Agreement
Archaea Merger Agreement: The Business Combination Agreement, dated April 7, 2021, as subsequently amended, pursuant to which, among other things, RAC acquired Legacy Archaea
Aria: Aria Energy LLC, a Delaware limited liability company, and its subsidiaries
Aria Holders: The members of Aria immediately prior to the Closing
Aria Merger: The transactions executed pursuant to the Aria Merger Agreement
Aria Merger Agreement: The Business Combination Agreement, dated as of April 7, 2021, as subsequently amended, pursuant to which, among other things, RAC acquired Aria
Atlas: Atlas Point Energy Infrastructure Fund, LLC, a Delaware limited liability company
Business Combination Agreements: The Aria Merger Agreement and the Archaea Merger Agreement
Business Combinations: The transactions executed pursuant to the Business Combination Agreements
CARB: California Air Resource Board
Class A Common Stock: Class A Common Stock, par value $0.0001 per share, of the Company
Class A Opco Units: Class A Units of Opco
Class B Common Stock: Class B Common Stock, par value $0.0001 per share, of the Company
Closing: The closing of the Business Combinations
Closing Date: The closing date of the Business Combinations, which was September 15, 2021
Common Stock: Class A Common Stock and Class B Common Stock
Environmental Attributes: Federal, state and local government incentives in the United States, provided in the form of RINs, RECs, RTCs, LCFS credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy
EPA: The U.S. Environmental Protection Agency
GAAP: Accounting principles generally accepted in the United States of America
INGENCO: NextGen Power Holdings LLC and its subsidiaries
Initial Public Offering: RAC’s initial public offering, which was consummated on October 26, 2020
Legacy Archaea: Archaea Energy LLC, a Delaware limited liability company, and its subsidiaries
Legacy Archaea Holders: The members of Legacy Archaea immediately prior to the Closing
LCFS: Low Carbon Fuel Standard
LFG: Landfill gas
Lightning JV: Lightning Renewables, LLC, a joint venture with Republic Services Renewable Energy, LLC
Merger: The transaction contemplated by the Merger Agreement
Merger Agreement: The Agreement and Plan of Merger, dated October 16, 2022, pursuant to which, among other things, the Company and Opco will merge with and into wholly owned subsidiaries of BP Products North America Inc.
MMBtu: One million British thermal units
MWh: Megawatt hour(s)
Opco: LFG Acquisition Holdings LLC, a Delaware limited liability company, which was formerly named Rice Acquisition Holdings LLC

3

Table of Contents
Private Placement Warrants: The 6,771,000 warrants originally issued to Sponsor and Atlas in a private placement that closed simultaneously with the consummation of the Initial Public Offering
RAC: Rice Acquisition Corp., prior to the consummation of the Business Combination
RECs: Renewable Energy Credits
RINs: Renewable Identification Numbers
RNG: Renewable natural gas
RTCs: Renewable thermal certificates
SEC: U.S. Securities and Exchange Commission
Sponsor: Rice Acquisition Sponsor LLC, a Delaware limited liability company
VIE: Variable interest entity
Warrant Agreement: The Warrant Agreement, dated October 21, 2020, by and among the Company, Opco and Continental Stock Transfer & Trust Company, as warrant agent, which governs the Private Placement Warrants


4

Table of Contents
Forward-Looking Statements
The information in this Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “could,” “would,” “should,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe” and other similar words. Forward-looking statements may relate to expectations for future financial performance, business strategies or expectations for the Company’s business. Specifically, forward-looking statements may include statements concerning the pending Merger, market conditions and trends, earnings, performance, strategies, prospects and other aspects of the business of the Company. Forward-looking statements are based on current expectations, estimates, projections, targets, opinions and/or beliefs of the Company, and such statements involve known and unknown risks, uncertainties and other factors.
The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to:

the risk that the proposed Merger may not be completed in a timely manner or at all, which may adversely affect the Company’s business and the price of the Company’s Class A Common Stock;
the effect of the announcement or pendency of the Merger on the Company’s business relationships, operating results and business generally;
unexpected costs, charges or expenses resulting from the Merger;
potential litigation relating to the Merger;
the Company’s ability to successfully integrate INGENCO and other future acquisitions;
the Company’s ability to recognize the anticipated financial, strategic and operational benefits of the Business Combinations, the INGENCO acquisition, the Lightning JV, and other future acquisitions and strategic transactions, which may be affected by, among other things, competition and the ability of the Company to grow and manage growth profitably and retain its management and key employees;
the possibility that the Company may be adversely affected by general economic, business and/or competitive factors, including rising inflation and interest rates;
the Company’s ability to develop and operate new projects, including the projects contemplated from the INGENCO assets and the Lightning JV;
the reduction or elimination of government economic incentives to the renewable energy market;
the execution of the Company’s contracting strategy and exposure to natural gas and Environmental Attribute prices for uncontracted volumes;
delays in acquisition, financing, construction, and development of new or planned projects;
the length of development cycles for new projects, including the design and construction processes for the Company’s projects;
the Company’s ability to identify suitable locations for new projects;
the Company’s dependence on landfill operators;
existing regulations and changes to regulations and policies that affect the Company’s operations;
decline in public acceptance and support of renewable energy development and projects;
demand for renewable energy not being sustained;
impacts of climate change, changing weather patterns and conditions, and natural disasters;
the ability to secure necessary governmental and regulatory approvals;
political instability and fears or actual acts of terrorism or war, including the armed conflict in Ukraine;
the Company’s expansion into new business lines; and
other risks and uncertainties described in the section entitled “Risk Factors” in Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”) or in the section entitled “Risk Factors” in Part II, Item 1A in subsequent Quarterly Reports on Form 10-Q, including this Report.
Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

5

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARCHAEA ENERGY INC.
Consolidated Balance Sheets
(Unaudited)
(in thousands, except shares and per share data)
September 30,
2022
December 31,
2021
ASSETS


Current Assets

Cash and cash equivalents ($191,404 related to VIE)
$299,467 $77,860 
Restricted cash
19,225 15,206 
Accounts receivable, net ($40 related to VIE)
47,255 37,010 
Inventory
19,084 9,164 
Prepaid expenses and other current assets ($105 related to VIE)
34,956 21,225 
Total Current Assets
419,987 160,465 
Property, plant and equipment, net ($103,359 related to VIE)
596,112 350,583 
Intangible assets, net ($217,117 related to VIE)
999,787 638,471 
Goodwill
47,833 29,211 
Equity method investments260,111 262,738 
Operating lease right-of-use assets6,639  
Other non-current assets16,573 9,721 
Total Assets
$2,347,042 $1,451,189 
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable - trade ($21,186 related to VIE)
$31,777 $11,096 
Current portion of long-term debt, net
24,120 11,378 
Current portion of operating lease liabilities1,239  
Accrued and other current liabilities ($632 related to VIE)
93,694 46,279 
Total Current Liabilities
150,830 68,753 
Long-term debt, net
887,824 331,396 
Derivative liabilities
53,349 67,424 
Below-market contracts132,626 142,630 
Asset retirement obligations
9,656 4,677 
Long-term operating lease liabilities5,657  
Other long-term liabilities
2,553 5,316 
Total Liabilities
1,242,495 620,196 
Commitments and Contingencies
Redeemable Noncontrolling Interests703,339 993,301 
Equity
Stockholders’ Equity
Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding
  
Class A Common Stock, $0.0001 par value; 900,000,000 shares authorized; 81,592,637 shares issued and outstanding as of September 30, 2022 and 65,122,200 shares issued and outstanding as of December 31, 2021
8 7 
Class B Common Stock, $0.0001 par value; 190,000,000 shares authorized; 39,052,668 shares issued and outstanding as of September 30, 2022 and 54,338,114 shares issued and outstanding as of December 31, 2021
4 5 
Additional paid in capital
304,296  
Accumulated deficit
(173,788)(162,320)
Total Stockholders’ Equity
130,520 (162,308)
Nonredeemable noncontrolling interests
270,688  
Total Equity
401,208 (162,308)
Total Liabilities, Redeemable Noncontrolling Interests and Equity
$2,347,042 $1,451,189 
_________________________________________
Parenthetical references reflect amounts as of September 30, 2022 for the Lightning JV VIE.
The accompanying notes are an integral part of these consolidated financial statements.
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ARCHAEA ENERGY INC.
Consolidated Statements of Operations
(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except shares and per share data)
2022202120222021
Revenues and Other Income




Energy revenue
$98,377 $10,916 $222,528 $13,975 
Other revenue
3,894 865 8,322 4,588 
Amortization of intangibles and below-market contracts
2,722 205 8,259 205 
Total Revenues and Other Income
104,993 11,986 239,109 18,768 
Equity Investment Income, Net
2,945 879 7,067 879 
Cost of Sales
Cost of energy
63,253 9,478 138,531 12,625 
Cost of other revenues
3,109 615 7,049 2,976 
Depreciation, amortization and accretion
16,972 3,142 43,191 4,077 
Total Cost of Sales
83,334 13,235 188,771 19,678 
General and administrative expenses
30,478 11,889 75,714 22,933 
Operating Income (Loss)
(5,874)(12,259)(18,309)(22,964)
Other Income (Expense)
Interest expense, net
(10,575)(1,586)(16,941)(1,606)
Gain (loss) on warrants and derivative contracts
(7,605)(10,413)10,575 (10,413)
Other income (expense)
(124)81 78 377 
Total Other Income (Expense)
(18,304)(11,918)(6,288)(11,642)
Income (Loss) Before Income Taxes
(24,178)(24,177)(24,597)(34,606)
Income tax expense
57  186  
Net Income (Loss)
(24,235)(24,177)(24,783)(34,606)
Net income (loss) attributable to nonredeemable noncontrolling interests
(2,020)(335)(2,020)(589)
Net income (loss) attributable to Legacy Archaea (8,569) (18,744)
Net income (loss) attributable to redeemable noncontrolling interests
(7,224)(8,262)(11,295)(8,262)
Net Income (Loss) Attributable to Class A Common Stock
$(14,991)$(7,011)$(11,468)$(7,011)
Net income (loss) per Class A Common Stock:
Net income (loss) – basic (1)
$(0.18)$(0.13)$(0.15)$(0.13)
Net income (loss) – diluted (1)
$(0.18)$(0.13)$(0.18)$(0.13)
Weighted average shares of Class A Common Stock outstanding:
Basic (1)
81,044,814 52,847,195 76,034,987 52,847,195 
Diluted (1)
81,044,814 52,847,195 78,542,786 52,847,195 
_________________________________________
(1) Class A Common Stock is outstanding beginning September 15, 2021 due to the reverse recapitalization transaction as described in “Note 4 - Business Combinations and Reverse Recapitalization.”
The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.
Consolidated Statements of Equity
(Unaudited)



Total Equity


Total Stockholders’ Equity
(in thousands)
Redeemable Noncontrolling
Interests
Members’ Equity

Members’ Accumulated Deficit
Class A
Common
Stock

Class B
Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Nonredeemable Noncontrolling
Interests

Total
Equity
Balance - December 31, 2021
$993,301 $ 

$ $7 

$5 

$ 

$(162,320)

$ 

$(162,308)
Warrant exercises— — — — — 11,836 — — 11,836 
Exchange of Class A Opco Units and Class B Common Stock for Class A Common Stock(314,693)— — 1 (1)314,693 — — 314,693 
Deferred tax impacts from exchange for Class A Common Stock transactions— — — — — 780 — — 780 
Share-based compensation expense— — — — — 12,785 — — 12,785 
Shares withheld for taxes on net settled awards— — — — — (2,634)— — (2,634)
Shares issued to vendor— — — — — 2,862 — — 2,862 
Net income (loss)(11,295)— — — — — (11,468)(2,020)(13,488)
Contributions from Lightning JV noncontrolling interest owner— — — — — — — 272,708 272,708 
Adjustment of redeemable noncontrolling interests to redemption amount36,026 — — — — (36,026)— — (36,026)
Balance - September 30, 2022
$703,339 $ 

$ $8 

$4 

$304,296 

$(173,788)

$270,688 

$401,208 



Total Equity


Total Stockholders’ Equity
(in thousands)
Redeemable Noncontrolling
Interests
Members’ Equity

Members’ Accumulated Deficit
Class A
Common
Stock

Class B
Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Nonredeemable Noncontrolling
Interests
Total
Equity
Balance - December 31, 2020
$ $34,930 $(4,156)$ $ $ $ $717 $31,491 
Net income (loss) prior to Closing
— — (18,744)— — — — (534)(19,278)
Members’ equity contributions
— 70 — — — — — — 70 
Share-based compensation expense prior to Closing— 2,349 — — — — — — 2,349 
Reclassification in connection with reverse recapitalization— (37,349)22,900 — 3 37,346 (22,900)— — 
Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability— — — 5 1 346,239 — — 346,245 
Issuance of Class B Common Stock in Aria Merger— — — — 2 394,908 — — 394,910 
Reclassification to redeemable noncontrolling interest408,762 — — — — (431,662)22,900 — (408,762)
Net income (loss) after Closing(8,262)— — — — — (7,011)(56)(7,067)
Adjustment of redeemable noncontrolling interest to redemption amount779,116 — — — — (346,831)(432,286)— (779,117)
Balance - September 30, 2021
$1,179,616 $ $ $5 $6 $ $(439,297)$127 $(439,159)





The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.
Consolidated Statements of Equity
(Unaudited)


Total Equity
Total Stockholders' Equity
(in thousands)Redeemable Noncontrolling InterestMembers' EquityMembers' Accumulated DeficitClass A
Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Nonredeemable Noncontrolling
Interests
Total
Equity
Balance - June 30, 2022$606,608 $ $ $8 $4 $392,118 $(158,797)$ $233,333 
Warrant exercises— — — — — 10,280 — — 10,280 
Exchange of Class A Opco Units and Class B Common Stock for Class A Common Stock3,134 — — — — (3,134)— — (3,134)
Share-based compensation expense— — — — — 3,862 — — 3,862 
Shares withheld for taxes on net settled awards— — — — — (871)— — (871)
Shares issued to vendor— — — — — 2,862 — — 2,862 
Net income (loss)(7,224)— — — — — (14,991)(2,020)(17,011)
Contributions from Lightning JV noncontrolling interest owner— — — — — — — 272,708 272,708 
Adjustment of redeemable noncontrolling interest to redemption amount100,821 — — — — (100,821)— — (100,821)
Balance - September 30, 2022
$703,339 $ $ $8 $4 $304,296 $(173,788)$270,688 $401,208 


Total Equity
Total Stockholders' Equity
(in thousands)Redeemable Noncontrolling InterestMembers' EquityMembers' Accumulated DeficitClass A
Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Nonredeemable Noncontrolling
Interests
Total
Equity
Balance - June 30, 2021$ $35,178 $(14,331)$ $ $ $ $462 $21,309 
Net income (loss) prior to Closing
— — (8,569)— — — — (279)(8,848)
Share-based compensation expense prior to Closing— 2,171 — — — — — — 2,171 
Reclassification in connection with reverse recapitalization— (37,349)22,900 — 3 37,346 (22,900)— — 
Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability— — — 5 1 346,239 — — 346,245 
Issuance of Class B Common Stock in Aria Merger— — — — 2 394,908 — — 394,910 
Reclassification to redeemable noncontrolling interest408,762 — — — — (431,662)22,900 — (408,762)
Net income (loss) after Closing(8,262)— — — — — (7,011)(56)(7,067)
Adjustment of redeemable noncontrolling interest to redemption amount779,116 — — — — (346,831)(432,286)— (779,117)
Balance - September 30, 2021
$1,179,616 $ $ $5 $6 $ $(439,297)$127 $(439,159)
The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.
Consolidated Statements of Cash Flows
(Unaudited)

Nine Months Ended September 30,
(in thousands)
20222021
Cash flows from operating activities



Net income (loss)
$(24,783)

$(34,606)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

Depreciation, amortization and accretion expense
43,191 

4,077 
Amortization of debt issuance costs
2,444 

627 
Amortization of intangibles and below-market contracts
(3,262)

(6)
Bad debt expense
153 

10 
Return on investment in equity method investments
15,202 

336 
Equity in earnings of equity method investments
(7,067)

(879)
Total (gains) losses on derivatives, net
(10,575)

10,413 
Net cash received (paid) in settlement of derivatives6,543  
Forgiveness of Paycheck Protection Loan
 

(201)
Share-based compensation expense
12,785 

2,887 
Changes in operating assets and liabilities:

Accounts receivable
(4,336)

(692)
Inventory
(2,441)

(270)
Prepaid expenses and other current assets
1,687 

(22,315)
Accounts payable - trade
8,300 

(1,207)
Accrued and other liabilities
39,964 

(7,475)
Other non-current assets(585)(3,490)
Other long-term liabilities(63)(1,919)
Net cash provided by (used in) operating activities
77,157 

(54,710)
Cash flows from investing activities

Acquisition of Aria, net of cash acquired
1,876 

(463,334)
Acquisition of assets and businesses
(274,556)

(31,527)
Additions to property, plant and equipment and progress payments
(225,868)

(88,209)
Purchases of biogas rights
 

(202)
Contributions to equity method investments
(10,837)

(4,100)
Return of investment in equity method investments9,496 

 
Net cash used in investing activities
(499,889)

(587,372)
Cash flows from financing activities

Borrowings on line of credit agreement
 

12,478 
Repayments on line of credit agreement
 

(12,478)
Proceeds from long-term debt, net of issuance costs
573,751 

361,959 
Repayments of long-term debt
(9,618)

(47,040)
Proceeds from reverse recapitalization and PIPE Financing 496,397 
Contributions from Lightning JV noncontrolling interest owner88,508  
Payment of acquisition contingent consideration(1,650) 
Capital contributions
 

70 
Taxes paid on net share settled stock-based compensation awards(2,633) 
Net cash provided by financing activities
648,358 

811,386 
Net change in cash, cash equivalents and restricted cash
225,626 

169,304 
Cash, cash equivalents and restricted cash - beginning of period
93,066 

1,496 
Cash, cash equivalents and restricted cash - end of period
$318,692 

$170,800 
Supplemental cash flow information

Cash paid for interest (1)
$11,480 

$1,869 
Non-cash investing activities

Accruals of property, plant and equipment and biogas rights incurred but not paid
$31,491 

$2,317 
_________________________________________
(1) Net of capitalized interest of $6.1 million and $7.2 million for the nine months ended September 30, 2022 and 2021, respectively.
The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Organization and Description of Business
Archaea Energy Inc. (“Archaea” or the "Company"), a Delaware corporation (formerly named Rice Acquisition Corp.), is one of the largest RNG producers in the U.S., with an industry-leading RNG platform primarily focused on capturing and converting waste emissions from landfills and livestock farms into low-carbon RNG and electricity. As of September 30, 2022, Archaea owns, through wholly-owned entities or joint ventures, a diversified portfolio of 46 LFG recovery and processing facilities across 20 states, including 13 operated facilities that produce pipeline-quality RNG and 33 LFG to renewable electricity production facilities, including one non-operated facility and one facility that is not operational.
Archaea develops, designs, constructs, and operates RNG facilities. Archaea, through wholly-owned entities or joint ventures, has entered into long-term agreements with biogas site hosts which grant Archaea the rights to utilize gas produced at their sites and to construct and operate facilities on their sites to produce RNG and renewable electricity.
Merger Agreement
On October 16, 2022, the Company and Opco entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BP Products North America Inc., a Maryland corporation (“Parent”), Condor RTM Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Condor RTM LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent (“Opco Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Company Merger”), and Opco Merger Sub will merge with and into Opco with Opco continuing as the surviving company and a wholly owned subsidiary of Parent (the “Opco Merger” and, together with the Company Merger, the “Merger”).
As a result of the Merger, (i) at the effective time of the Company Merger (the “Effective Time”), each share of Class A Common Stock outstanding immediately prior to the Effective Time (subject to certain exceptions, including shares of Class A Common Stock owned by stockholders of the Company who have not voted in favor of the adoption of the Merger Agreement and have properly exercised appraisal rights in accordance with Delaware law) will automatically be converted into the right to receive $26.00, without interest thereon (the “Per Share Price”) in cash, subject to applicable withholding taxes, and (ii) at the effective time of the Opco Merger (the “Opco Merger Effective Time”), each Class A Opco Unit outstanding immediately prior to the Opco Merger Effective Time that is held by a holder other than the Company or any of its subsidiaries will automatically be converted into the right to receive the Per Share Price in cash, subject to applicable withholding taxes. Also, at the Effective Time, each share of Class B Common Stock will be automatically cancelled and extinguished without any conversion thereof or consideration paid therefor.
Immediately following the Opco Merger Effective Time, each of the outstanding Private Placement Warrants will be redeemed for cash in accordance with the terms of the Warrant Agreement, as amended in connection with the Company’s entry into the Merger Agreement, which provides that immediately following the Opco Merger Effective Time, each Private Placement Warrant that is issued and outstanding immediately prior to the Effective Time will be automatically redeemed for the right to receive an amount, in cash, equal to (i) the Per Share Price minus (ii) the Warrant Price (as defined in the Warrant Agreement and which is currently $11.50) as reduced pursuant to the calculation provided in Section 4.4 of the Warrant Agreement, without interest.
The parties are targeting closing the Merger by the end of 2022, subject to customary closing conditions, including approval by the Company’s stockholders and receipt of regulatory approvals. Upon closing of the Merger, the Class A Common Stock will no longer be listed on any public market. See “Note 21 - Subsequent Events” for more information regarding the Merger.
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ARCHAEA ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Business Combinations
On September 15, 2021, Archaea consummated the business combinations pursuant to (i) the Business Combination Agreement, dated April 7, 2021 (as amended, the “Aria Merger Agreement”), by and among Rice Acquisition Corp., a Delaware corporation (“RAC”), Rice Acquisition Holdings LLC, a Delaware limited liability company and direct subsidiary of RAC (“RAC Opco”), LFG Intermediate Co, LLC, a Delaware limited liability company and direct subsidiary of RAC Opco (“RAC Intermediate”), LFG Buyer Co, LLC, a Delaware limited liability company and direct subsidiary of RAC Intermediate (“RAC Buyer”), Inigo Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Aria Merger Sub”), Aria Energy LLC, a Delaware limited liability company (“Aria”), and Aria Renewable Energy Systems LLC, a Delaware limited liability company, pursuant to which, among other things, Aria Merger Sub was merged with and into Aria, with Aria surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Aria Merger Agreement, the “Aria Merger”), and (ii) the Business Combination Agreement, dated April 7, 2021 (as amended, the “Archaea Merger Agreement”), by and among RAC, RAC Opco, RAC Intermediate, RAC Buyer, Fezzik Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Archaea Merger Sub”), Archaea Energy LLC, a Delaware limited liability company, and Archaea Energy II LLC, a Delaware limited liability company (“Legacy Archaea”), pursuant to which, among other things, Archaea Merger Sub was merged with and into Legacy Archaea, with Legacy Archaea surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Archaea Merger Agreement, the “Archaea Merger” and, together with the Aria Merger, the “Business Combinations”). Legacy Archaea was determined to be the accounting acquirer of the Business Combinations, and Aria was determined to be the predecessor to the Company. Unless the context otherwise requires, the “Company,” “we,” “us,” and “our” refer, for periods prior to the completion of the Business Combinations, to Legacy Archaea and its subsidiaries and, for periods upon or after the completion of the Business Combinations, to Archaea Energy Inc. and its subsidiaries, including Legacy Archaea and Aria Energy LLC.
Archaea has retained its “up-C” structure, whereby (i) all of the equity interests in Aria and Legacy Archaea are held indirectly by Opco through RAC Buyer and RAC Intermediate, (ii) Archaea’s only assets are its equity interests in Opco, and (iii) Sponsor, Atlas, the RAC independent directors, the Legacy Archaea Holders and the Aria Holders own or owned economic interests directly in Opco. In connection with the consummation of the Business Combinations, Rice Acquisition Holdings LLC was renamed LFG Acquisition Holdings LLC. In accordance with Accounting Standards Codification (“ASC”) 810 - Consolidation, Opco is considered a VIE with Archaea as its sole managing member and primary beneficiary. As such, Archaea consolidates Opco, and the remaining unitholders that hold economic interests directly in Opco are presented as redeemable noncontrolling interests on the Company’s financial statements.
Subsequent to the Business Combinations, transactions impacting the ownership of Class A Opco Units include warrant exercises, repurchases from Aria Renewable Energy Systems LLC, redemption of certain other Class A Opco Units in exchange for Class A Common Stock, and issuances related to vested restricted stock units (“RSUs”). The ownership structure of Opco upon closing of the Business Combinations and as of September 30, 2022, which gives rise to the redeemable noncontrolling interest at Archaea, is as follows:
September 30, 2022September 15, 2021
Equity Holder
Class A Opco Units
% Interest
Class A Opco Units
% Interest
Archaea
81,592,637 67.6 %52,847,195 45.9 %
Total controlling interests
81,592,637